In an interview withET Now, N Jayakumar, Managing Director,Prime Securities, talks about the Indian markets and what can be expected in times to come. Excerpts:

ET Now: It is very easy to make a bearish argument, but none of those bearish arguments have made sense in last one month because despite a challenging macro and micro environment, the Indian markets are holding on. What do you have to say about that?

N Jayakumar: The mood depicts extreme caution, bearishness and pessimism. We have been facing intense or variants of these themes over the last several months now. Two or three big things have happened. Firstly, the rupee has weakened dramatically which in the short run has over shot its fair levels by some distance. At the same time, oil prices have cooled off more dramatically that the need was as some would argue.

After the correction, I expect oil prices to go down further and the subsidy bill of the government could be a very big beneficiary of this oil price collapse. These are the two big takeaways. Nothing changes India's life more than oil prices. This is because oil prices determine subsidies, inflation, the dollar-rupee equation and how much the government has to borrow in order to pay oil bonds. Oil prices determine virtually everything that has Indian macro written on it.

So, the fall of Brent from 127 to 89-90 and now at about 92-93 indicates that oil prices have collapsed pretty dramatically by almost 30%-35%. The prices could be headed even lower. It might pause for a bit and then come off. I expect Brent to cool off at the 80-82 level and the WTI at about 70-75.

ET Now: Do you think the crude cool off is a trigger enough for us to scale up higher from the current juncture or do you think the policy deadlock and the currency weakness along with the RBI inaction are going to scale us back?

N Jayakumar: The policy inaction may be a thing of the past. I say this because in the past six-eight months, virtually nothing has been said or done. May be that has begun to change, but in reality it will change pretty dramatically. I expect the Prime Minister along with this group of confidants to roll out a whole bunch of measures. Some of the measures may be short on performance vis-a-vis expectations similar to the bunch of measures relating to what the RBI said a few days ago.

However, barring that we will have frequent stream of announcements and policies which will convince the world that we are not going to sleep anymore. I am very hopeful that a lot will happen on that front in conjunction with steps to control the rupee fall and the overall macro which continues to be extremely difficult especially as far as Europe and the US are concerned.

N Jayakumar: The answer to that is an unequivocal yes. The markets are frustrated and exacerbated by the fact that the FM did not deliver. This change is being welcomed. It is not Pranab, but the person occupying there was unwilling to do anything or say anything. For the moment they are hoping that whoever takes on the mantle will say a lot more.

ET Now: For the next six months, what kind of market we could be steering at?

N Jayakumar: We would be looking at a moderately uptrend market. We will probably attempt to scale 6000 in the first quarter of FY13, which means January-March. Closer to November-December, we will be in the 5800-6000 range. It will be a case of two-and-a-half steps forward and one-and-a-half steps back. It is a time to make a higher base and absorbing bad news and absorbing international macro which is negative. That is going to be the style of the market. Stock specific infra and high beta names will be more in focus, defensives will be out. The Indian consumption story is a bit under threat. Therefore, high PEs of consumption stories may be a thing of the past at least for the next six to nine months.

ET Now: Give us some names in terms of what would be good opportunities to buy now and then cash in the second half or early next year?

N Jayakumar: We are very bullish on auto ancillaries because they are principally export driven. Export driven engineer products are going to be our big theme and also auto ancillaries, textiles, may be even things that we compete directly with China like shipyards. We would be very bullish on domestic infra. This is because some action will be coming here.

We are very bullish on pipeline companies, especially the majors who have been expanding out of India and building up the oil infrastructure for the rest of the world. Those companies are very interesting from our perspective. On the domestic interest rate sensitive theme, we would look at specific private sector banks which we were quite bullish on. So, our major play will be to select banks, infrastructure, and export-oriented themes.